Director of Foreign Client

[WordIsBond]

OK, so I'm now a non-exec director of a foreign (non-EU) client -- as a result of my shareholding, not as a result of the services I provide.

I've also got a contract with them that provides the services of multiple people (not just me, but also employees of MyCo Ltd and subcontractors). The directorship is not mentioned in the contract for those services, it is through a separate agreement, in which I receive travel expenses, a small stipend, and share options. The directorship began after the services contract and will no doubt continue after the services contract ends.

CEST would automatically put me inside IR35 -- but the contract is a separate agreement. (The directorship would be considered an employment for purposes of taxation.) Providing services of multiple people would almost always, I think, put this outside -- it's not what employees do. It's also pretty clearly outside on SDC and on substitution, and there's actually a pretty good case on MOO, too.

But I wanted to check the legislation. Does anyone know HMRC's basis for saying office holders are automatically inside?

I found this which seems to support my view, that only the director's compensation is employment income:

HMRC does not accept that it is possible for NEDs to carry out office holder duties in a self-employed capacity. However, a NED may also provide consultancy services to the same company and it is the nature of the consultancy arrangement which determines its tax and NIC treatment.

Nixon Williams has an article that says about the same.

But it would be nice if I had something more than opinions from some guys on the Internet. Does anyone know where I could find this discussed in legislation and/or case law? Is CEST overly-simplified for this kind of situation?

[mudskipper]

You're right that as an office holder you are IR35 caught.

You could declare your stipend as your IR35 caught income, and any non-director services you provide would need to be under a separate agreement.

Some advice here

https://bishopfleming.co.uk/non-exec...rs-fees-taxed/


"However, care needs to be taken to ensure that the provision of such services can be properly distinguished from the role or duties normally expected from or associated with being a non executive director, and ideally the arrangement should be documented and set out in a contact separate from the directorship with the directorship itself properly remunerated (with tax & NIC accounted for under PAYE)."


re: CEST - read it in the context of the separate contract - you are not performing that contract as an office holder.

[WordIsBond]

Yes, that's what I've read elsewhere, was hoping I could get something more definitive than opinions. But then, it's tax, and HMRC seems to be allergic to definitive unless it is definitively wrong.

Yes, the stipend is definitely under a separate agreement and definitely caught. It's a personal agreement, not one with MyCo -- I'm the one who ones the shares, not MyCo, and I'm the director.

The risk is the 'part and parcel' thing. That's not really what's happening but I can just see some HMRC genius deciding it is and once they've decided something, they've decided.